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ADP, GDP Reports Reveal What's Wrong With the Economy

NEW YORK (TheStreet) -- The Automatic Data Processing (ADP) report on April private-sector hiring is not a miss: Companies added 220,000 workers, the best increase since November, beating forecasts for 210,000. But the ADP report and the government's report on first-quarter gross domestic product show some parts of the economy are still amiss, raising concerns about the spring recovery and the path of stocks.

The problem is that the industries that should be leading the charge at this point aren't doing much. Manufacturing added only 1,000 jobs, and the battered construction industry added 19,000 -- not awful, but down 2,000 from March, even as spring home-selling season swung into high gear. And big companies with 1,000 or more workers hired 57,000 people -- down from 71,000 last month. The improvement from last month's 191,000 new jobs came mostly in services hiring, which jumped by 16,000.

With expectations high, will it be enough to satisfy a market that expects the government to announce Friday that employers added 215,000 jobs, with whisper numbers a good bit higher? And will it be enough to offset a GDP number for the first quarter, also released today, that was worse than even low expectations for the weather-ravaged first three months of 2014?

The thing that rankles about the two reports is that the wrong things are stagnating. It was a given that the weather should cut into consumption, but the GDP report shows consumption growing at a healthy 3% annual rate even as the overall economy grew only 0.1% annualized. Since consumption is 70% of all spending, that's enough to give you a 2% growth rate before the rest of the economy gets in the way.

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